Election posters for Binyamin Netanyahu on the walls of the Old City of Jerusalem. Photograph: Lior Mizrahi/Getty Images

Binyamin Netanyahu has vowed to rebuff international demands to allow a Palestinian state with a border based on the pre-1967 Green Line and its capital in East Jerusalem, as hardline pro-settler parties and factions are expected to make unprecedented gains in Tuesday's election.

"When they say, 'Go back to the 67 lines,' I stand against. When they say, 'Don't build in Jerusalem,' I stand against," the Israeli prime minister told Channel 2 in a television interview.

"It's very easy to capitulate. I could go back to the impossible-to-defend 67 lines, and divide Jerusalem, and we would get Hamas 400 metres from my home." He would not allow that to happen under his leadership, he said.

Likud supporters on Sunday draped the walls of Jerusalem's Old City with huge banners proclaiming "Only Netanyahu will protect Jerusalem" and "Warning: 67 border ahead".

Netanyahu's electoral alliance, Likud-Beiteinu, is on course to emerge from the election as the biggest party in the 120-seat parliament, with 32-35 seats. Negotiations to form the next coalition government will begin immediately after final results are announced.

Most analysts expect Netanyahu to invite the ultra-nationalist Jewish Home party, led by Naftali Bennett, to become a coalition partner following a bruising election battle between the pair. "An hour after the elections, the fight between Netanyahu and Bennett will be over. They will sit down together to form a coalition government," wrote the respected columnist Nahum Barnea in Yedioth Ahronoth.

But, he added, they will then "discover that their real enemies are within their own homes". Both parties are fielding extremely hardline candidates, some of whom are expected to become members of the next Knesset, as the Israeli parliament is called.

The expected strengthening of the hard right in the next parliament may encourage Netanyahu to seek a broad base for his coalition.

"He will try for a large coalition in order to prevent the possibility of one party blackmailing him," said Efraim Inbar, of the Begin-Sadat Centre for Strategic Studies. "The more parties you have, the more they neutralise each other. He will want parties both to his right and to his left."

Labour, historically the party of the Israeli left, has moved towards the political centre. Its leader, former journalist Shelly Yachimovich, has all but refused to discuss the Israeli-Palestinian issue, which traditionally has been at the heart of Labour's policies, instead attempting to capitalise on huge socio-economic protests in Israel 18 months ago. Labour is expected to be the second largest party, with 16-17 seats – up from 13 in the current parliament – but Yachimovich has publicly rejected the possibility of joining a "radical right" coalition led by Netanyahu.

However, the leaders of two new centrist parties have indicated their willingness to discuss a partnership with the Likud-Beiteinu alliance, led by Netanyahu and the ultra-nationalist former foreign minister Avigdor Lieberman.

Yair Lapid, the leader of the secular Yesh Atid party, which is forecast to win 11-13 seats, would be a counterweight to the religious ultra-orthodox parties, which are also potential coalition partners. Lapid has also steered away from the Israeli-Palestinian issue, concentrating his campaign on social and economic issues.

The former foreign minister Tzipi Livni may be a more problematic partner for Netanyahu as the chief pitch of her party, Hatnua, has been the resumption of meaningful negotiations with the Palestinians on a two-state settlement to the conflict. "The radical right and [Naftali] Bennett will bring about the destruction of Israel," she warned at a campaign rally on Saturday.

But, said Inbar, "most of what Livni says about the peace process is just talk – no one thinks it's serious. She has gone down in the polls because that's all she talks about." Hatnua is predicted to win seven or eight seats, down from a high of 10 earlier in the campaign.

Netanyahu needs to assemble a coalition of more than 60 MPs in order to form the next government.